Rep. Maxine Waters (D-Calif.) this week dispatched a letter urging regulators to closely evaluate sales of mortgage servicing rights from banks to non-bank specialty servicers. Such transactions have flooded the market over the past few years, raising alarm that the specialty firms cannot handle the new volume and that homeowners are again in the line of fire for abuses as they scramble to avoid foreclosure.
As ownership of their loans change hands, some borrowers are running into delays with mortgage modifications and facing many of the same issues -- flawed documentation, erroneous fees, and wrongful eviction -- that triggered a multi-billion dollar settlement between banks and states in 2012. In her message to Comptroller of the Currency Thomas J. Curry and to Joseph A. Smith, who is charged with overseeing the $26 billion national settlement, Waters pressed to ensure that nonbank servicers "have the operational capacity to manage the increased volume." She also stressed that regulators must make sure that banks are selling their mortgage servicing rights in an effort "to evade modifications of loans."